University of Canterbury v Insurance Council of New Zealand Inc & Ors [2013] NZCA 471

On 4 September 2010, Canterbury was hit by the first of the major earthquakes to strike the region. On 10 September 2010, the Christchurch City Council adopted a policy that enabled it to require building owners to strengthen existing buildings up to a capacity of 67% of the new building standard (NBS). ICNZ challenged the lawfulness of the policy, on the basis that it was inconsistent with the powers given to territorial authorities under the Building Act 2004.

Section 124 of the Building Act gives territorial authorities the power to require work to be undertaken on buildings which are dangerous, insanitary or earthquake-prone. A building is dangerous if it is likely to cause personal injury, death or damage to other property in the ordinary course of events, excluding the occurrence of an earthquake. A building is earthquake-prone if:

its ultimate capacity will be exceeded in a moderate earthquake (being an earthquake that would generate shaking that is of the same duration, but is one third as strong as the earthquake shaking that would be used to design a new building at that site); and

it would be likely to collapse causing injury or death or damage to other property.

The Court of Appeal held that both criteria had to be met before a building was earthquake-prone. The effect of this ruling is that a territorial authority cannot require a building to be strengthened to a capacity of more than 34% NBS, even if the strengthened building has features which make it likely to collapse in a stronger than “moderate” earthquake.

The Court of Appeal quashed a declaration that the Council could require building owners to carry out work to reduce or remove specific vulnerabilities in a building capable of causing injury, death or property damage. The Court noted that there may be no objection to a requirement by Council that specific vulnerable parts of a building be brought up to 34% NBS, but declined to make a ruling on this issue.

The case highlights the tension between the enactment of a nationwide standard and the desire of councils to respond to regional circumstances.

The reports of the Canterbury Earthquakes Royal Commission make it clear that the earthquake sequence in Canterbury was unusual, in terms of the intensity of the shaking and its occurrence in an area previously assessed as low to moderate for seismic activity. Cantabrians have weathered thousands of aftershocks, of which 56 have been of a magnitude greater than 5.0 and three have been greater than 6.0, including the devastating “aftershock” that occurred on 22 February 2011 in which 185 people died.

The evidence considered by the Royal Commission suggested that the performance of unreinforced masonry buildings strengthened to 34% NBS did not perform significantly better in the February event than those that had not been strengthened, although the hazard factor used in strengthening those buildings was lower than it would have been in recognised areas of high seismic activity (such as Wellington). Of the buildings associated with the most loss of life, the PGC building, which had undergone strengthening, was assessed at 30-40% NBS. The CTV building was assessed by experts retained by the Department of Building and Housing at 40-55% NBS. Neither, accordingly, were earthquake-prone.

Buildings strengthened to 67% NBS are less likely to collapse in a major earthquake, but achieving this level of strengthening imposes a significant economic cost on building owners, insurers and the community. ICNZ estimated the cost in Christchurch at several hundred million dollars. The effect on the University’s insurance claim alone was about $140 million.

The cost of a higher standard of strengthening accordingly needs to be balanced against the risk of a major earthquake and its probable outcome. The Commission noted that the magnitude of the 22 February 2011 earthquake was 1.5-2 times higher than the design event for which new buildings are designed. It has been described elsewhere as a 1 in 2,475 year event.

The Royal Commission concluded that the experience of the Canterbury earthquakes did not require a change to the one third rule as a national standard, although it recommended raising that standard to 50% NBS for certain elements of unreinforced masonry buildings. However, the Commission recommended that the power be given to territorial authorities to increase the standard in their districts to take into account specific economic, building or seismic conditions, or where the hazards posed by certain buildings justified a higher standard. Changes to the standard should only be made following the special consultative process in the Local Government Act.

The Commission’s recommendations were the subject of a consultative process run by the Ministry of Building, Innovation and Employment (MBIE), which concluded in July 2013. The recommendations that power be given to territorial authorities to require a greater level of strengthening than the national standard were not accepted. The standard will accordingly remain 34% NBS throughout New Zealand, although the Building Act will be amended to clarify that only buildings with less capacity are earthquake-prone and to make it clear that the standard applies to parts of a building, as well as the whole.[1]

The University of Canterbury has applied for leave to appeal to the Supreme Court. Regardless of the outcome of that decision, the Government’s current intention appears to be that the ability of councils to require earthquake strengthening will be limited under forecast amendments to the Building Act to 34% NBS throughout New Zealand.

The Commission separately recommended that an investigation be undertaken into buildings with characteristics that might lead them to collapse in a major earthquake, so that appropriate steps could be taken to reduce the potential hazard posed by these structures. MBIE is leading a review by councils of 242 buildings with non-ductile columns (a feature shared by the CTV building), half of which were reportedly “cleared” by the end of September 2013. As the law stands, councils do not have power to require changes to buildings likely to collapse in a major earthquake (unless their capacity is less than 34% NBS). It is accordingly unclear what steps will be taken if and when potential hazards are identified. The Minister is taking advice on this issue, as part of MBIE’s wider review of the Commission’s recommendations.

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